-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AFohYqPCisUqS0dAnSYFt8gp3GKcdLpMFBqXppo7lTXaVg+JX8QJ9uj49wEDB+GG R+1Cqp+UT5WgyqT8elDWIw== 0000350846-99-000012.txt : 19991115 0000350846-99-000012.hdr.sgml : 19991115 ACCESSION NUMBER: 0000350846-99-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUPREME INDUSTRIES INC CENTRAL INDEX KEY: 0000350846 STANDARD INDUSTRIAL CLASSIFICATION: TRUCK & BUS BODIES [3713] IRS NUMBER: 751670945 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08183 FILM NUMBER: 99747514 BUSINESS ADDRESS: STREET 1: 65140 US 33 E STREET 2: PO BOX 237 CITY: GOSHEN STATE: IN ZIP: 46526 BUSINESS PHONE: 2196423070 MAIL ADDRESS: STREET 1: P O BOX 237 STREET 2: 65140 U S 33 EAST CITY: GOSHEN STATE: IN ZIP: 46526 FORMER COMPANY: FORMER CONFORMED NAME: EXPLORATION SURVEYS INC DATE OF NAME CHANGE: 19850813 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 1999 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 1-8183 SUPREME INDUSTRIES, INC. (Exact name of registrant as specified in its charter) Delaware 75-1670945 (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) No.) 65140 U.S. 33 East, P.O. Box 237, Goshen, Indiana 46528 (Address of principal executive offices) Registrant's telephone number, including area code: (219) 642-3070 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock ($.10 Par Value) Outstanding at November 8, 1999 Class A 8,584,207 Class B 1,739,140 The index to Exhibits is at page 16 in the sequential numbering system. Total number of pages: 16. Page 1 of 16 SUPREME INDUSTRIES, INC. CONTENTS Page No. PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Consolidated Balance Sheets 3-4 Consolidated Statements of Income 5 Consolidated Statements of Cash Flows 6 Notes to Consolidated Financial Statements 7-9 Item 2. Management's Discussion and Analysis of 9-13 Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 14 Signatures 15 Index to Exhibits 16 Page 2 of 16 Part I. Financial Information Item 1. Financial Statements Supreme Industries, Inc. and Subsidiaries Consolidated Balance Sheets September 30, December 31, 1999 1998 --------------- --------------- Assets (Unaudited) Current assets: Cash and cash equivalents............... $237,396 $185,424 Accounts receivable, net................ 30,084,566 28,709,559 Inventories............................. 33,026,638 28,792,650 Deferred income taxes................... 1,081,839 1,081,839 Other current assets.................... 1,690,283 1,465,237 --------------- --------------- Total current assets............... 66,120,722 60,234,709 --------------- --------------- Property, plant and equipment, at cost....... 56,558,606 50,030,906 Less, Accumulated depreciation and amortization..................... 20,759,618 18,688,584 --------------- --------------- Property, plant and equipment, net. 35,798,988 31,342,322 --------------- --------------- Intangible assets, net....................... 1,349,593 1,502,076 Other assets................................. 905,691 991,947 --------------- --------------- Total assets....................... $104,174,994 $94,071,054 =============== =============== The accompanying notes are a part of the consolidated financial statements. Page 3 of 16 Supreme Industries, Inc. and Subsidiaries Consolidated Balance Sheets, Concluded September 30, December 31, 1999 1998 --------------- --------------- Liabilities and Stockholders' Equity (Unaudited) Current liabilities: Current maturities of long-term debt.... $5,168,251 $2,014,975 Trade accounts payable.................. 10,058,584 10,235,964 Accrued income taxes.................... 2,082,407 961,628 Other accrued liabilities............... 10,217,165 7,736,198 --------------- --------------- Total current liabilities.......... 27,526,407 20,948,765 Long-term debt............................... 30,558,208 18,303,207 Deferred income taxes........................ 1,333,007 1,333,007 --------------- --------------- Total liabilities.................. 59,417,622 40,584,979 --------------- --------------- Stockholders' equity.......................... 44,757,372 53,486,075 --------------- --------------- Total liabilities and stockholders' equity............................ $104,174,994 $94,071,054 =============== =============== The accompanying notes are a part of the consolidated financial statements. Page 4 of 16 Supreme Industries, Inc. and Subsidiaries Consolidated Statements of Income (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ------------------------ -------------------------- 1999 1998 1999 1998 ----------- ----------- ------------ ------------ Revenues............... $67,013,683 $51,406,038 $189,875,331 $168,221,575 ----------- ----------- ------------ ------------ Costs and expenses: Cost of sales..... 55,397,138 43,165,665 157,886,268 138,891,672 Selling, general and administrative.. 5,895,528 4,907,523 16,613,680 15,142,831 Interest.......... 769,230 397,766 1,707,852 1,304,205 ----------- ----------- ------------ ------------ 62,061,896 48,470,954 176,207,800 155,338,708 ----------- ----------- ------------ ------------ Income before income taxes. 4,951,787 2,935,084 13,667,531 12,882,867 Income taxes........... 2,022,000 1,222,000 5,497,000 5,291,000 ----------- ----------- ------------ ------------ Net income..... $2,929,787 $1,713,084 $8,170,531 $7,591,867 =========== =========== ============ ============ Earnings per share: Basic......... $.28 $.14 $.73 $.63 Diluted....... .28 .14 .73 .63 Shares used in the computation of earnings per share: Basic......... 10,338,495 12,087,210 11,128,113 12,052,128 Diluted....... 10,368,929 12,140,177 11,188,624 12,134,660 The accompanying notes are a part of the consolidated financial statements. Page 5 of 16 Supreme Industries, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, ------------------------------- 1999 1998 --------------- --------------- Cash flows from operating activities: Net income.............................. $8,170,531 $7,591,867 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization..... 2,322,502 2,225,910 Loss (gain) on disposal of equipment....................... (10,750) 86,998 Changes in operating assets and liabilities..................... (2,409,675) (6,183,925) --------------- --------------- Net cash provided by operating activities......................... 8,072,608 3,720,850 --------------- --------------- Cash flows from investing activities: Additions to property, plant and equipment............................. (6,619,260) (4,574,599) Proceeds from disposal of property, plant and equipment................... 3,325 109,900 Decrease in other assets................ 86,256 55,883 --------------- --------------- Net cash (used in) investing activities......................... (6,529,679) (4,408,816) --------------- --------------- Cash flows from financing activities: Proceeds from revolving line of credit and other long-term debt.............. 91,079,810 77,312,374 Repayments of revolving line of credit and other long-term debt.............. (75,671,533) (76,724,492) Proceeds from exercise of stock options. 95,625 114,101 Acquisiton of treasury stock............ (16,994,859) (14,120) --------------- --------------- Net cash provided by (used in) financial activities............... (1,490,957) 687,863 --------------- --------------- Increase (decrease) in cash and cash equivalents................................ 51,972 (103) Cash and cash equivalents, beginning of period..................................... 185,424 159,044 --------------- --------------- Cash and cash equivalents, end of period..... $237,396 $158,941 =============== =============== Noncash investing and financing activities: Common Stock dividends.................. $4,843,391 $11,947,665 Class A Common Stock exchanged in exercise of stock options (12,843 shares)............................... --- 185,950 The accompanying notes are a part of the consolidated financial statements. Page 6 of 16 SUPREME INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - BASIS OF PRESENTATION AND OPINION OF MANAGEMENT The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all of the information and financial statement disclosures necessary for a fair presentation of consolidated financial position, results of operations and cash flows in conformity with generally accepted accounting principles. In the opinion of management, the information furnished herein includes all adjustments necessary to reflect a fair statement of the interim periods reported. All adjustments are of a normal and recurring nature. The December 31, 1998 consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. NOTE B - INVENTORIES Inventories, which are stated at the lower of cost or market with cost determined on the first-in first-out method, consist of the following: September 30, December 31, 1999 1998 ------------- ------------- Raw materials.................$ 21,372,099 $ 18,419,217 Work-in-progress.............. 6,348,756 4,154,914 Finished goods................ 5,305,783 6,218,519 ------------ ------------ $ 33,026,638 $ 28,792,650 ============ ============ The valuation of raw materials, work-in-progress and finished goods inventories at interim dates is based upon a gross profit percentage method and bills of materials. The Company has historically had favorable and unfavorable adjustments in the third and fourth quarters resulting from the annual physical inventories. The Company is continuing to refine its costing procedures for valuation of interim inventories in an effort to minimize the annual book to physical inventory adjustments. NOTE C - INCOME TAXES The effective income tax rate for the three months ended September 30, 1999 was 40.8% compared to 41.6% for the three months ended September 30, 1998. The effective tax rate for the nine months ended September 30, 1999 was 40.2% compared to 41.1% for the nine months ended September 30, 1998. The decrease in the effective tax rate in both the 1999 periods is a result of pretax losses in 1998 of the Honduran hardwood flooring facility (closed during the 1998 fourth quarter) that were not recognized in computing the U.S. tax liability. Page 7 of 16 NOTE D - EARNINGS PER SHARE Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share gives effect to all potentially dilutive securities that were outstanding during the period. The weighted average number of shares of common stock used in the computation of diluted earnings per share are as follows: Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 1999 1998 1999 1998 -------- -------- ------- -------- Weighted average number of shares outstanding (used in computation of basic earnings per share) 10,338 12,087 11,128 12,052 Effect of dilutive securities: Options and warrants 31 53 61 83 -------- ------- ------- ------- Diluted shares outstanding (used in computation of diluted earnings per share) 10,369 12,140 11,189 12,135 ======== ======= ======= ======= The computations of the number of common shares used in the determination of basic and diluted earnings per share give retroactive recognition to the 5% common stock dividend paid on July 19, 1999 (see Note F). NOTE E - STOCK REPURCHASE On April 12, 1999, the Company announced an offer to its stockholders to acquire up to 2,000,000 shares of its Class A and Class B Common Stock at a cash purchase price not greater than $10.00 per share nor less than $8.75 per share. The Company purchased 1,688,823 shares at $10.00 per share through the offer. To finance the stock repurchase the Company borrowed $17,056,000 repayable quarterly in equal installments of $609,143 through May 11, 2004 when the entire remaining principal amount is due. The Company is also required to make an additional annual principal payment equal to 20% of the preceding year's net income which exceeds $5,000,000, within 105 days after December 31. The additional principal payment cannot exceed $1,000,000 in any year. Concurrently the Company entered into an interest rate swap agreement for the entire $17,056,000 that fixes the interest rate at 6.9% over the term of the loan. Page 8 of 16 NOTE F - STOCK DIVIDEND On June 30, 1999, the Company's Board of Directors declared a 5% common stock dividend payable on July 19, 1999 to stockholders of record on July 12, 1999. NOTE G - SUBSEQUENT EVENT On October 28, 1999 the Company announced an offer to repurchase shares from its odd lot holders who own less than 100 shares of Class A Common Stock. Under the terms of the offer odd lot holders must tender all of the shares held by them. The Company will pay the closing price of the Class A Common Stock on the American Stock Exchange plus $.125 on the date the Company receives the holders' certificates accompanied by the letter of transmittal. The offer will remain open through 5:00 P.M. Eastern Standard Time on December 15, 1999. There will be no transaction or administrative costs to the holders. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Results of Operations The Company experienced it's largest revenue quarter ever. Revenues increased $15.6 million to $67.0 million for the quarter ended September 30, 1999 from $51.4 million for the quarter ended September 30, 1998. Revenues for the nine months ended September 30, 1999 increased $21.7 million to 189.9 million, a new record, compared to $168.2 million for the nine months ended September 30, 1998. The Company's dry freight and Spartan product lines continue to be the drivers of the Company's revenue growth. Within the Company's dry freight product line, revenue from the Company's fiberglass reinforced panels ("FRP") products more than doubled for the nine months ended September 30, 1999 when compared to the comparable prior year period. Revenues from the Company's Spartan line increased 73% for the nine months ended September 30, 1999 when compared to the nine months ended September 30, 1998. These product lines consumed 100% of the Company's FRP production through September 30, 1999. Gross profit for the three months ended September 30, 1999 improved to 17.3% from 16.0% for the three months ended September 30, 1998. Responsible for the improvement were the Company's material and overhead expenses which declined as a percentage of revenues. Contributing to the overhead improvement were the record revenues in the quarter as those items that do not vary directly with volume declined as a percentage of total revenues. Direct and indirect labor costs continue to be issues, particularly at the Company's largest Page 9 of 16 manufacturing plant located in Goshen, Indiana. Labor turnover and training costs hampered productivity in both the quarter and nine months ended September 30, 1999. The Company's gross profit percentage for the nine months ended September 30, 1999 was 16.8% compared to 17.4% for the prior year's nine month period. A decrease in material as a percentage of revenues was offset by increases in both direct labor and overhead. As discussed earlier, a very competitive labor market, particularly at the Company's largest facility in Goshen, Indiana, has negatively impacted productivity due to excessive turnover and training costs. The increase in overhead costs was caused by increased indirect labor cost and those items in the overhead pool that fluctuate directly with labor costs. Selling, general and administrative expenses as a percentage of revenues declined .7% to 8.8% for the quarter ended September 30, 1999 from 9.5% for the prior year quarter while for the nine months they were also 8.7% compared to 9.0% for the prior year's nine month period. The primary reason for the decline in both periods is the higher revenues experienced when compared to the prior year. Interest expense for the quarter ended September 30, 1999 increased $371,464 to $769,230 while for the nine months it increased $403,647 to $1,707,852. The increase in interest expense in both periods is primarily attributable to the $17,056,000 term loan borrowed in May 1999 to finance the Company's stock repurchase program. The Company's effective income tax rate was 40.8% for the three months ended September 30, 1999 and 40.2% for the nine months ended September 30, 1999. This compares to 41.6% and 41.1% for the comparable prior year periods. The effective income tax rate declined in both 1999 periods due to pretax losses in 1998 of the Company's Honduran hardwood facility that were not deductible for U.S. income tax purposes in the prior year periods. Net income was $2.9 million for the quarter ended September 30, 1999 and $1.7 million for the quarter ended September 30, 1998. This resulted in diluted earnings per share of $.28 and $.14, respectively. For the nine months ended September 30, 1999, net income was $8.2 million compared to $7.6 million for the nine months ended September 30, 1998. This resulted in diluted earnings per share of $.73 and $.63, respectively. Page 10 of 16 Liquidity and Capital Resources Cash flows from operating activities and funds available under the Company's revolving credit agreement were adequate to finance operations and provide for capital expenditures during the nine months ended September 30, 1999. Net income and depreciation and amortization continue to be the most significant sources of operating cash flow. The increase of $1.4 million in accounts receivable and $4.2 million in inventories were the primary uses of operating cash flow in the period. The increases in both accounts receivable and inventories are a result of the significantly higher revenues experienced in the period. The Company has spent $6.6 million on capital expenditures during the year. Major capital projects during the year include $1.3 million for Enterprise Resource Planning software that is Year 2000 compliant and will also provide improved operating information; $1.6 million for office facilities that will be completed in the fourth quarter; $0.7 million for a manufacturing facility to provide needed capacity in Georgia; $0.7 million at the Company's FRP facility for improved handling and additional storage as well as improvements at our Pennsylvania, Georgia and California manufacturing plants. Additionally, the Company is in the process of negotiating for an Industrial Revenue Bond to purchase the North Carolina facility it currently leases. The transaction is not expected to close until early in the year 2000. The principal financing activities during the nine months ended September 30, 1999 were the use of the Company's revolving credit facility to finance operations and capital expenditures and a $17.1 million five year term loan used to purchase 1,688,823 shares of the Company's Class A Common Stock in the Dutch Auction offer that expired May 10, 1999. The Company anticipates that cash flows from operations and funds available under the Company's revolving credit agreement will be sufficient to meet the Company's cash needs during 1999. Year 2000 The Company has successfully completed the installation of certified Year 2000 compliant software for all major functions and all operating facilities at a combined software and hardware cost of $1.3 million. Expenditures for the investment in the new hardware and software Year 2000 were funded from operating activities combined with funds available under the Company's revolving credit agreement. The successful implementation of the new information system is the completion of a project that was commenced during 1996. With the assistance of an independent consulting group, the Company conducted a complete analysis of it's system and operating requirements. The selection of the software was based on the strength of the Page 11 of 16 manufacturing software modules combined with the quality and level of expertise the software provider could furnish. During the last quarter of 1998 and the first three quarters of 1999, the Company completed the implementation and testing of the software at all of its locations. The Company had developed a contingency plan that would have permitted the Company to use its prior software after December 31, 1999 by reprogramming dates in its prior software. However, with the successful implementation of the new Year 2000 compliant software, management believes there is no longer a real need for the contingency plan. While the Company's most urgent goal was to obtain Year 2000 compliance, an equally important goal to improve the Company's information systems to provide more timely and accurate financial and operating reports to better manage the Company was set. The business and process improvement will be an ongoing project. The Company will continue to provide the education and training necessary to its personnel to achieve these goals. The Company's major suppliers of raw materials used in the Company's products have indicated that they are Year 2000 compliant. The raw materials used in the Company's products are commodity in nature and are readily available across the country from a large number of suppliers. The Company does not believe it will have difficulty obtaining raw materials because of established relations with multiple sources for its raw materials and the fact that they are readily available from a large number of sources. The Company also believes there is not significant risk from the failure of its customers to become Year 2000 compliant because of the large number of active accounts and the fact that no single account is more than 6% of revenues. The Company's products are sold direct to large users; there are approximately 85 truck distributors and 37 bus distributors as well as approximately 500 truck dealers throughout the country who are customers of the Company. The Company believes the worst case scenario relating to Year 2000 issues would be the disruption or unavailability of utility services. The Company also believes that this possibility is remote. Additionally, the Company's seven manufacturing plants and eight distribution facilities are all served by different utility companies and it is unlikely that all would suffer from a Year 2000 problem. As noted in the next section, "Forward Looking Statements", a major risk factor for the Company is the availability of chassis. The Company's major sources of chassis have indicated that they are Year 2000 compliant and that their chassis are also Year 2000 compliant. Page 12 of 16 Forward-Looking Statements This report contains forward-looking statements, other than historical facts, which reflect the view of the Company's management with respect to future events. Although management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that the expectations reflected in such forward-looking statements are reasonable, and it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from such expectations include, without limitation, limitations on the availability of chassis on which the Company's product is dependent, availability of raw materials, severe interest rate increases and the Company's and its suppliers and customers' ability to make its and there respective operating and financial systems Year 2000 compliant. The Company assumes no obligation to update the forward-looking statements or to update the reasons actual results could differ from those contemplated by such forward-looking statements. Page 13 of 16 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. a) Exhibits: Exhibit 27 - Financial Data Schedule b) Reports on Form 8-K: None Page 14 of 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SUPREME INDUSTRIES, INC. DATE: November 12, 1999 BY: /s/ROBERT W. WILSON Robert W. Wilson Executive Vice President, Treasurer, Chief Financial Officer and Director (Principal Financial and Accounting Officer) (Signing on behalf of the Registrant and as Principal Financial Officer.) Page 15 of 16 SUPREME INDUSTRIES, INC. FORM 10-Q INDEX TO EXHIBITS Sequential Number Assigned Numbering System in Regulation S-K Page Number Item 601 Description of Exhibit of Exhibit - ----------------- ---------------------- ---------------- (2) No exhibit. (3) No exhibit. (4) No exhibit. (10) No exhibit. (15) No exhibit. (18) No exhibit. (19) No exhibit. (22) No exhibit. (23) No exhibit. (24) No exhibit. (27) Financial data schedule. (99) No exhibit. Page 16 of 16 EX-27 2
5 9-MOS DEC-31-1999 SEP-30-1999 237,396 0 30,765,566 681,000 33,026,638 66,120,722 56,558,606 20,759,618 104,174,994 27,526,407 30,558,208 0 0 1,041,189 0 104,174,994 189,875,331 189,875,331 157,886,268 157,886,268 16,613,680 0 1,707,852 13,667,531 5,497,000 8,170,531 0 0 0 8,170,531 0.73 0.73
-----END PRIVACY-ENHANCED MESSAGE-----